FNCE 221 - Project Sukhumvit Final Edition

Private & Confidential

Project Sukhumvit
Positioning for growth in the emerging markets

Fraser and Neave, Limited
26 March 2012

PRELIMINARY | SUBJECT TO FURTHER REVIEW AND EVALUATION
This materials may not be used or relied upon for any other purpose other than as specifically contemplated
by a written agreement with J.P. Morgan.

1

Disclaimer
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2

Agenda
1.

Client Profile – Fraser & Neave Ltd.

2.

Motivation for Deal

3.

Industry Analysis

4.

Overview of Target – Malee Sampran PCL

5.

The Sukhumvit Deal

6.

Valuation

7.

Transaction Structure

8.

Credentials

9.

Appendix

10. Financials

3

Executive Summary
J.P. Morgan Chase & Co. Asia (also commonly referred to as “J.P. Morgan”) is grateful for the opportunity to present our
views to Fraser and Neave Limited (also commonly referred to as “F&N”) regarding its potential acquisition of Malee
Sampran Public Company Limited (also commonly referred to as “Malee”) in the deal described in this proposal
collectively termed the “Sukhumvit Deal”.
The proposed acquisition of Malee is instrumental for F&N in it’s stride towards enhancing its position within the Asia
Pacific soft drinks arena and to enhance its capabilities of competing on the global stage.
• The Sukhumvit Deal is transformational and will help both parties achieve its long term goals of diversifying revenue
streams to enhance the quality of earnings and maximizing returns to shareholders.
• Valuation is key and together with other critical factors that need to be addressed, will determine the success of the
Sukhumvit Deal.
• Fraser and Neave not only needs a world class advisor with a proven track record in M&A and the Consumer Products
market, Fraser and Neave requires an advisor who intrinsically knows the Indochina soft drinks industry and can
provide valuable strategic advice through the negotiation process.

4

1.1 Company Profile
Overview

Share Price Performance & Recent News

• F&N is engaged in the production and sale of food
and beverages (F&B), development and investment
in real estate investment trusts (REIT) and in the
printing & publishing business.
• Headquartered in Singapore, F&N has a presence in
over 30 countries across Asia Pacific, Europe, and
the United States.
• In its fiscal year ended Sept 2011, F&N’s revenue
increased YoY by 10% to S$6,274mn and group’s
profit increased YoY by 8% to $1,152mn.

Key Financials

6

350

10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0

300
250
200
150
100
50

Volume

Fraser & Neave

Mar-12

Sep-11

Mar-11

Change
+10.1%
+7.5%
+6.2%
-17.8%
+11.1%
+5.5%
+5.9%
+11.4%
-5.0%
-10.8%
-0.1%

Sep-10

FY2010
5,696.
1,071
584.5
2,876
6,948
41.8 cents
17.0 cents
$4.38
10.0%
41.4%
3.3%

Mar-10

0
Sep-09

FY2011
6,274
1,151
620.6
2,363
7,721
44.1 cents
18.0 cents
$4.88
9.5%
30.6%
3.2%

‘000

Mar-09

(S$ mil)
Revenue
EBIT
Attributable Profit
Net Debt
Equity
EPS (Basic)
Dividend per Share
NAV per Share
Return on Equity
Gearing Ratio
Average Cost of Debt

%

Rebased STI Index

Source: Bloomberg

Feb 2011| Formation of F&N Creameries
Oct 2011| Expiry of bottling agreement with
The Coca-Cola Company (TCCC)
Nov 2011| Opening of Changi City Point

1.2 Diversified Brand Portfolio
Food & Beverage

Property

Printing & Publishing

F&N is engaged in the production
and sales of F&B products including
soft drinks, dairies, and alcoholic
beverages. It distributes products in
the form of concentrates to bottlers,
as well as finished products to mass
retailers. The business is mainly
operated via subsidiaries; Asia
Pacific Breweries, F&N Foods, and
F&N Creameries.

Develops, invests in, and manages
both commercial and residential
properties via its subsidiary Frasers
Centrepoint Ltd. The group also has
two investment trusts (REIT),
Frasers Commercial Trust and
Frasers Centrepoint Trust with
their respective portfolio of
diversified real estate investments.

Operates in the printing and
publishing segment through its
subsidiary, Times Publishing. It is
engaged in publishing, printing,
direct sales, distribution, retailing
of books and in the provision of
educational services through its
brand Marshall Cavendish.

Revenue by Segment

Revenue by Geography

S$ mil
4000
3000
2000

1000
0
2007
2008
2009
2010
2011
Food & Beverage Property Printing & Publishing
7

Singapore
Rest of South East Asia
South Pacific

Malaysia
Other Asia
Europe and USA

1.3 Analysis of Business
Food & Beverage
Overview
• F&N has extensive competencies in F&B given its 70year experience in the industry
• F&B business represents the highest compound growth
across the past 5 years
• F&N has a leading market position in Singapore and
Malaysia with well established brands e.g. 100Plus,
Seasons

Industry Outlook
• Asia Pacific F&B is slated for strong growth
• Breweries sub-segment dominates earnings with
strong growth expected due to various brand
acquisitions

S$ mil

CAGR = 13%

4000
3000

2000
1000
0
2007

2008

2009

Revenue

S$ mil
400

2010

2011

EBIT

300
200
100
0

• Soft drink revenues threatened by the termination of
bottling agreement with TCCC

• F&N’s lack of a strong geographical foothold outside of
Malaysia and Singapore represents potential for future
expansion

Country

Off-Trade Value Share

Ranking

Asia Pacific

0.3%

27

Malaysia

26.9%

1

Singapore
8

2007

2008

2009

Softdrinks

Dairies

24.5%

1

Source: Euromonitor

2010

2011

Breweries

Property
Overview

S$ mil

• Property business accounts for 34% of revenues and
49% of net profit
• Well-established
property
development
and
investment network with over 50 domestic and 30
international projects
• On top of property development and investment, the
group also operates REITs and a hospitality business

CAGR = 9%

2500
2000
1500
1000
500
0
2007

Industry Outlook

Revenue

• Sales progress remains firm for F&N’s existing
developments despite the recent spate of property
measures dampening demand
• Positioned to capitalize on growing demand for
property in China, with 77% of its Chinese land bank
slated for launch in 2013 and beyond
• Property revenues and profits are expected to decline
in the short term with the adoption of IFRS 115
Planned Launches in FY 2012

Singapore

No. of Units

2,088

Australia (Putney Hill)

116

China (Suzhou)

898

Source: Company Data

9

2008

2009

2010

2011

EBIT

EBIT
(S$mil)
450
400
350
300
250
200
150
100
50
0
2007

2008

Investment Property

2009

2010

2011

Development Property

Overview

Industry Outlook

• Strong in education publishing business with
Singapore Education products exported to
Pakistan, U.S, Chile, and South Africa

• Printing and publishing industry is in a state of
decline with the rise of paperless and online
publishing

• Strong adoption of Marshall Cavendish textbooks
in the US led to it being the first Asian content
approved for use in U.S. schools

• Slow growth of between 1-2% is expected in the
Asia Pacific printing and publishing market

• Restructuring initiatives have led to the
divestment of several unprofitable business units

• F&N Board remains open to strategic options for
the printing and publishing business

Asia-Pacific Publishing Market Value
90
80
70
60
50
40
30
20
10
0

100
0
-100

2007

2008
Revenue

2009

2010
EBIT

2011

1.05%
1.00%
0.95%

Market Value (US$bn)
Source: Datamonitor

10

2014F

200

1.10%

2013F

300

1.15%

2012F

400

1.20%

2011

500

2010

CAGR = - 6%

1.25%

2009

S$ mil
600

Y-o-Y Growth (%)

1.4 Investment Proposition

Strong growth potential
in Asia Pacific F&B
industry

Need to address pressing
concerns

Right time to explore
potential investment
opportunities within F&B

11

2.1 Challenges for F&N

• Saturation of soft drinks market in Singapore and
Malaysia
• Average annual market share growth of 0.4%
• Product differentiation is key to boosting market share
• Hard to compete with market leaders e.g. TCCC
• Highly fragmented market with over 110 beverage
companies in Asia Pacific
Coca-Cola Co, The
Source: Euromonitor

Tingyi Holdings Corp
Danone, Groupe

2014E

F&N Brands

2013E

2012E

TCCC Brands

Market Share (%)
30.0
25.0
20.0
15.0
10.0

PepsiCo Inc

5.0

Suntory Holdings Ltd

0.0

Nestlé SA
Kirin Holdings Co Ltd
F&N

13

2011

Escalation in Competitive Landscape

2010

Coca-Cola and Sprite represent 35% of F&N’s revenues.
Short to medium term pressure on revenues
Estimated to cause a 25% fall in revenues
Need to be mitigated by expanding product portfolio
and growing market share in South East Asia

2009

•
•
•
•

2008

End of Agreement with TCCC

Revenue

S$ mil
800
700
600
500
400
300
200
100
0
2007

Pressure on Revenues

Others

2007

2008

2009

Malaysia

2010
Singapore

2011

Shift in Consumer Trends
Key Consumer Trends

F&N’s Strategic Position

• Traditional categories such as carbonates are
stagnating
• Renewed focus on premium products that meet health
needs. Soft drinks with health benefits poised for
strongest growth

• Increasingly important for F&N to offer innovative new
products that target the health conscious
• Juices constitute a majority (31%) of new product
launches in recent years
• Rising consumption levels in low to middle income
markets increases demand for healthier products
• F&N should position its core brands such as 100Plus and
Fruit Tree to capitalize on shifting dynamics

Global Carbonates Retail Value

US$ bil
100

CAGR = 5%

80
60
40
20
0
Cola
US$ bil

Fruit-flavored carbonates

Global Healthy Beverages Retail Value

250000

CAGR = 20%

200000

F&N Foods Brand Portfolio

150000
100000
Healthier Range

50000

Normal Products

0
Fortified
Beverages
Source: Euromonitor

14

Better for you
(BFY) Beverages

2005

2010

Naturally
Healthy
Beverages

2015

Source: Company Data

Barriers to Regional Expansion
F&N can overcome obstacles by acquiring distribution networks that are deeply rooted within these
inaccessible communities
• Key competitors such as TCCC, PepsiCo, Sime Darby, and
Nestle are constantly vying for market share in a largely
saturated market
• Difficulty in sustaining organic growth without extensive
distribution networks across region
• Penetrating some of South East Asia’s most densely
populated communities remain a considerable challenge
given the intricacies of the market (transportation,
infrastructural, legal, and regulatory barriers)
• Government restrictions and protectionism towards
domestic players may pose a hindrance for foreign
distributors seeking to establish a strong foothold
• Capturing the growth of emerging markets can be costly and
complex if administered poorly

15

2.2 Strategic Review
There is a need for Fraser & Neave to expand regionally via inorganic growth
• Mitigate the impact of the termination of TCCC deal by expanding its product portfolio and
growing its market share
• Position itself to capitalize on the shift in consumption patterns towards healthier products
• Target growth opportunities by expanding into developing markets within the region
• Expand its distribution network to introduce existing brands into new markets

16

2.3 Recommendation
Expansion into Indochina fruit/vegetable juice market
F&N has identified Indochina as a potential region for future growth:
• Expansion into Thailand dairy market (2012)
• Launch of 100Plus in Thailand (2011)

Fruit/Vegetable
Juice

Asian
Specialty
Drinks

Bottled Water

Carbonates

RTD Tea &
Coffee

Singapore

0.2%

-2.3%

0.3%

1.3%

0.8%

Malaysia

2.3%

0.1%

4.4%

4.8%

2.1%

Indochina

7.6%

0.1%

9.7%

10.1%

5.7%

Indonesia

4.9%

5.4%

12%

11.1%

8.3%

East Asia

3.9%

0.2%

4.5%

3.1%

3.2%

South Asia

15.2%

5.4%

10.2%

19.1%

0%

Middle East

5.2%

2.3%

3.35%

0.6%

0%

Australasia

1.7%

-1.5%

2.4%

2%

0%

Regions

Source: Global Market Information Database

17

3.1 Global Fruit/Vegetable Juice Industry
Overview
Total Volume Growth (2005-2015)

•
•
•

Asia Pacific

Second largest soft drinks category globally
by value and volume
Strong growth driven by the shift in
popularity towards healthier products

North America
Western Europe
Latin America
Middle East and Africa

Asia-Pacific dominates juice consumption,
accounting for more than half of global sales

Eastern Europe
Australasia
-20
Source: Euromonitor

9%

19%

5%
21%

40
60
2005-2010

80

100
%

Key Regions of Fruit Juice Consumption

Soft Drinks Trade Value (US$mil)
8%

0
20
2010-2015

Bottled Water
Western
Europe

Carbonates

Concentrates

Asia Pacific

North
America

Fruit/Vegetable Juice
35%

RTD Coffee
RTD Tea

3%

Sports & Energy Drinks
Highest
Consumption

19

Medium to High
Consumption

Low to Medium
Consumption

Low
Consumption

Zero to Low
Consumption

3.1 Global Fruit/Vegetable Juice Industry
Competitive Landscape

Future Outlook

• Global fruit/vegetable juice industry is highly
fragmented with top 10 players accounting for only
19% of global market volume

• Despite being the most competitive segment in the
beverages industry, juices continue to gain
momentum in line with rising awareness of
maintaining healthy and nutritious eating habits

• No global brand dominance
categories

as seen in other

• Domestic markets are dominated by regional
players with extensive knowledge of local customers
and regional networks
• Market leader, TCCC was able to expand Minute
Maid internationally by acquiring regional players in
emerging markets

• Emerging markets in Asia and Latin America
represent the strongest growth regions
• Growth in Asia Pacific is led by China, India and
Indochina
Strong Growth in Asia Pacific and Latin America Juice Market

Global Brand Share

Others
81%

TCCC
5%

Asia Pacific
PepsiCo
Inc
3%

Source: Euromonitor

20

Latin
America

Highest
Consumption

Medium to High
Consumption

Low to Medium
Consumption

Low
Consumption

Zero to Low
Consumption

3.2 Indochinese Economic Landscape
• Comprises of rapidly developing economies
including Thailand, Vietnam, and Cambodia
•

Rising affluence causes shift in demand towards
higher quality products

•

Indochinese markets continue to register strong
soft drinks consumption growth amid rising
disposable income and a large youth
demographic

•

Larger size of F&B industry in Indochina relative
to Singapore and Malaysia

• Need to expand regionally - Stagnating growth in
Singapore and Malaysian markets

Forecasted GDP Growth

Growth (%)

9
8
7
6
5
4
3
2
1
0
2011

2012F

2013F

Thailand
Laos

2014F

Vietnam
Myanmar

2015F

2016F

Cambodia
Singapore

US$ mil
80,000

Consumer Expenditure in F&B

60,000
40,000
20,000
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Singapore
21

Malaysia

Source: Economist Intelligence Unit

Thailand

Vietnam

3.3 Fruit/Vegetable Juice in Indochina
Overview
Strength of the Indochinese fruit/vegetable juice market is complementary to F&N’s regional expansion plans

•

•

•
•

Health and wellness trend has driven the growth
of natural and traditional produce, which are more
culturally embedded within the market
Ongoing maturity of carbonates, increasingly busy
lifestyles, and rising health awareness have made
consumers more receptive to the convenience and
nutritional benefits of fruit/vegetable juice.

Numerous fruit suppliers in the region facilitate
growth of the fruit juice industry
Growth in the industry is led by Vietnam and
Thailand

Litres Mil

Fruit Juice Sales Volume

300
250
200
150
100
50

Thailand
Source: Euromonitor

22

Vietnam

2015F

2014F

2013F

2012F

2011

2010

2009

2008

2007

2006

2005

0

Vietnam
•

Fruit/vegetable juice market in Vietnam has shown strong and stable growth, driven by a rise in income levels and the
ongoing health and wellness trend

•

100% juice is projected to register the fastest total sales growth

•

Despite the historical dominance of domestic firms in the market, they are facing competition from imported brands
that are perceived to be of higher quality than homegrown alternatives

Vietnam Retail Sales Volume

VND Mil

Market Share Amongst Top 10 Players
(Vietnam)

1200

CAGR = 13%

1000
800
600
400
200

100% Juice

2015F

2014F

2013F

2012F

2011

2010

2009

Nectars (25-99%)

Source: Euromonitor

23

2008

2007

2006

2005

0

Juice Drinks (up to 24%)

Local Firms

Foreign Firms

Thailand
Best Strategic Option: Penetrate the Indochinese juice market by acquiring a domestic player
•

Fruit/vegetable juice is set to maintain a healthy growth trajectory over the forecast period, driven by new product
innovation and preference for healthier products

•

Market share is led predominantly by domestic players who possess wide distribution networks, offering lower
prices relative to foreign brands

•

Difficult for foreign players to penetrate the market without a strong local network

Market Share Amongst Top 10 Players (Thailand)

Thailand Retail Sales Value
8000

CAGR = 8%

Tbt Million

7000
6000
5000
4000

3000
2000
1000

100% Juice

24

Nectars (25-99%)

2015F

2014F

2013F

2012F

2011

2010

2009

2008

2007

2006

2005

0

Juice Drinks (up to 24%)

Local Firms

Foreign Firms

3.4 Potential Strategic Acquisition
Company

Country

Strengths

Weaknesses

Malee Sampran

Thailand

 Strong distribution network in
Thailand and Vietnam
 Growing presence outside Indochina
 Contract farming network in Thailand
 Strong R&D capabilities

 Business restructuring in 2009 due to
unfavourable financial position. Recovered
well in 2011 with strong profits and
streamlined cost and leverage structure.

 Market leader in Thai Fruit Juice
market
 Strong in canned pineapple business

 May be difficult to acquire due to company’s
dominant position
 Limited distribution network outside of home
market
 Existence of redundant smoothie retail
business

 Market leader in Vietnam Fruit Juice
market
 Strong in Dairies market

 Potential clash of interests with F&N’s
existing dairies business in Indochina

 Strong brand presence in Vietnam
 Distribution network across South East
Asia

 Private owners may not be willing to divest
interests
 Existence of unrelated cooking oil business

 Market leader in Vietnam carbonated
soft drinks market
 Small but growing position in the fruit
juice market

 Carbonated drinks market subject to
slowdown in growth
 Lack of emphasis on healthier products
 Fluctuation of earnings in recent years

TIPCO Foods

Thailand

Vietnam Dairy
Products

Chia Kim Lee
Food Ind.

Singapore

Saigon
Beverages

25

Vietnam

Vietnam

Rank

1

2

3

4

5

4.1 Target Profile
Malee Sampran Public Company Limited
• Established in 1978, Malee is a public listed
company registered in the Kingdom of Thailand
• Core business encompasses the manufacturing and
distribution of beverages and canned fruit products
• Over 40 years of expertise in packaged food and
beverages
• Significant presence throughout Thailand and other
key markets
• Strong brand equity with successful brands across
sub-segments and tiers
• Committed towards the highest standards of
product quality through research and development
(R&D) investments

Head Office

• Pathum Thani, 12130, Thailand

Industry

• Packaged Consumer Goods

Ticker &
Exchange

• MALEE: Stock Exchange of Thailand
(SET)

Shares
Outstanding

• 99,999,000 shares

Headcount

• 1,340 Employees

Key Ratios

2010

2011

% Change

EBIT Margin

4.82%

7.02%

+45.6%

Net Profit
Margin

3.68%

6.11%

+66.0%

ROE

27.2%

41.7%

+53.3%

EPS (THB)

0.11

0.23

+109.0%

Millions

Mn Baht

฿4,500

Total Revenues

฿4,000
฿3,500
฿3,000
฿2,500
฿2,000
2007A

27

2008A

2009A

2010A

2011A

4.1 Target Profile
Key Business Segments

Agro-Product
& Export
Canned
Pineapple
Canned
Sweetcorn
Canned
Tropical
Fruits

Vegetable &
Fruit Juices

Milk Products

Cereal
Beverages

Others

Fruit Juices

Plain
Flavored
Milk

Farmer’s

Corn Milk

Fruitesia
Fruit Bars

Vegetable
Juices

Sweetened
Flavored
Milk

First Choice

Mineral
Water

Malee Food
Service

UHT Milk

Malee Food

Pasteurized
Milk

28

Canned Fruits

Malee
Bottled
Water

4.1 Target Profile
Product Portfolio

Canned Fruits

UHT & Pasteurized
Milk
29

Vegetable & Fruit
Juices

Cereal Beverages

Sweet Corn

Others

4.1 Target Profile
Brand Portfolio
• A comprehensive brand portfolio allows Malee to complement the diverse needs of consumers across all segments of
the domestic market
• With over 40 years of product development, the Malee brand is known to be deeply etched in the minds of
consumers who associate excellence and quality with its distinct list of brands
• Malee’s established brand equity will catalyze prospects for joint product roll-outs with F&N

First
Choice

Farmer

Malee
I-Corn

Malee
Healti
Plus

Malee

Malee
Veggies

Malee
Juize Mix

Chokchai
Farm

30

4.1 Target Profile
Business Operations
Subsidiaries

Agri Sol Company Ltd
100%

Abico Dairy Farm Company
Ltd

PPO Farm Company Ltd

Related Parties

Abico Land Company Ltd

Abico Holding Public Company
Ltd

Malee Sampran
Public Company
Limited

Malee Enterprise Company Ltd
99.9%

Chokchai Milk Company Ltd

Central Food Retail Company
Ltd
Dhanamitr Factoring Company
Ltd
CG Broker Company Ltd

Production Capacity
• 180 million litres of beverages
• 5.4 million cases of canned foods
• 8,000 metric tons of concentrated
pineapple

31

Production Facilities
• Two manufacturing plants located
in Nakorn Prathom Province,
Thailand
• Total plant area of 800 sq. meters

Supply Chain Network
• Distribution channels include
supermarkets, convenience stores,
hotels, wholesalers
• 95% of raw material supplies are
sourced domestically

4.1 Target Profile
Geographic Footprint
Existing Coverage
• Strong presence within the domestic Thai market
including the Northern and Southern provinces
• Distribution agents located domestically and across
Asia, including Laos, Vietnam, Myanmar, Singapore,
Hong Kong and Pakistan

• Products are exported directly to customers or
through agents, spanning major markets within
Europe, Middle East, U.S. and Asia

Growth Opportunities
• Immense opportunities to scale into neighboring
Indochinese markets with dense populations,
serving over 600 million consumers
• Location serves as a gateway to Southern China and
South Asia
• Well positioned as a reliable brand amongst
domestic consumers

32

Hong Kong

Thailand

Vietnam

4.1 Target Profile
Shareholding Structure
Holder Name

% of Total

1

Abico Holdings PCL

17,840,700

25.49

2

Credit Suisse / Singapore

16,850,000

24.07

3

Chirathivat Pichai

4,583,700

6.55

4

Wittayanupong Siriluck

3,150,000

4.50

5

Wichitpan Piyaporn

2,581,900

3.69

6

DBS Vickers Securities Singapore

2,074,600

2.96

7

Quan Securities Co Ltd

2,000,000

2.86

8

Thai NVDR Co Ltd

1,935,500

2.77

9

Thailand Securities Depository

1,713,412

2.45

10

Chirathivat Sakchai

1,640,800

2.34

11

Sitthichaiwiset Somboon

1,329,000

1.90

12

Sitthichaiwiset Sirincha

1,205,900

1.72

13

Permpoonkij Areeya

963,000

1.38

14

Tanaka Kenji

896,900

1.28

15

33

Amount Held

Pruksawan Wantana

765,200

1.09

Individual
Holding Company
Bank
Investment Advisor
Other

Thailand

Singapore

Undisclosed

4.2 Financial Performance
Share Price
% 350

25,000

300
20,000
250
15,000

200

150

10,000

100
5,000
50

0
Sep-11

0
Oct-11

Nov-11
Volume

34

Dec-11
MALEE

Jan-12
BANGKOK S.E.T.

Feb-12
Volume ('000)

4.3 Potential Risks
Through collaborative efforts with F&N, Malee will be better positioned to weather the uncertainties shaped by
global economic forces, and realize its vision of capturing strategic growth

Global Macro
• Contagion effect from slowdown in global economy may dampen profitability within the short term
• Volatility of commodity prices could inflate costs of raw materials, thereby impacting bottom-line
sustenance
• Management will need to adapt fast to technological changes in order to capitalize on innovative
marketing channels
• Unpredictable weather conditions may interrupt supply-chain operations and stifle nationwide
sales
Firm Specific
• Inadequate management expertise for capital raising and strategic growth plans

35

5.1 The Sukhumvit Vision

Penetrate into the booming F&B market in
Indochina

Leverage on Malee’s expertise to strengthen
foothold in Indochina

R&D capabilities to facilitate innovation of healthier products

Capitalize on Malee’s distribution network to introduce F&N’s existing
products into Indochinese markets
Expanded product mix that includes canned fruits to cater to a wider
customer base
37

5.2 The Sukhumvit Partnership Model
Booming F&B Market in Thailand

7,000
6,500
6,000
2011

38

2012

2013
2014
Retail Value

2015

2016

‘000 tonnes

Animal or Vegetable
Oil

Wheat Products

Fresh, Chilled or
Frozen Fish

Fresh and Frozen
Shrimps

Volume of Exports

35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Rice

• Mandatory measures to ensure quality and
safety has alleviated ongoing food safety
concerns

7,500

Sugar

• More than 80% of raw materials can be found
locally at low prices, potentially reducing costs
for F&N

8,000

Tapioca Products

• Thailand’s exports of food products will rise to
US$2.1 billion in 2012 (14.3% growth Y-o-Y). In
particular, the strong export market for
processed fruits caters for future expansion
opportunities

Market Size of Canned/Preserved Food in Thailand

Prepared Poultry

• Market size of canned/preserved food is
projected for stable growth in the short to
medium term

THB ‘000

Canned and Processed
Fruits

Thailand Food Industry

Strengthen Foothold in Indochina
Market Share of Fruit/Vegetable Juice in
Thailand
• Market share of 6.3% in the fruit/vegetable juices
market of Thailand
• Ranked 5th largest in the country
• Current customer base will serve as a viable entrance
point for F&N to introduce existing products

21%

24%

Readily Available Low Cost Supplies
• Malee is able to produce at lower costs due to the
availability of a steady supply of raw materials in
Thailand. An acquisition will allow F&N to capitalize
on Malee’s extensive supply network to further
reduce production costs
• Malee’s ‘contract farming’ program with its member
farmers reduces its exposure to fluctuating
commodity prices

Regional Distribution Network
3%

Product Type

9%

11%

Thai Pure Drinks Ltd
Tipco Foods
Malee Sampran
Green Spot

39

FoodStar Inc
PepsiCo Inc
Uni-President
Others

Fruit/Vegetable juice

Thailand, Hong Kong, China,
Pakistan, Vietnam

Dairy Products

21%

6%

Region of Distribution

Thailand, Vietnam, Cambodia

Ready-to-Drink Tea

5%

Thailand

Canned Fruit

Thailand, Vietnam

Synergies
F&N’s Strategy and Plans

Malee’s Value Proposition

Expanding its product portfolio
and growing its market share

• Differentiated products such as UHT corn
milk and canned fruits
• Existing consumer base and market share

Position itself to capitalize on the
shift in consumption patterns
towards healthier products

• Healthier product range
• Complementary R&D

Long term sustainable growth by
penetrating into developing
markets

• Well positioned to capture growth in
Indochina and beyond
• Efficient raw materials management and
increased R&D investment

Synergistic Outcomes
R&D Expertise and
Facilities

40

Distribution
Networks

Expanded Product
Mix

6.1 Fair Value of Malee
In comparison with its current share price, Malee is fair valued at THB 41.50

(THB mil)

2011A

2012F

2013F

2014F

2015F

2016F

EBIT

261

368

466

571

684

803

Tax expense

(78)

(110)

(140)

(171)

(205)

(241)

Depreciation + Amortization
Less: Changes in working
capital

50

58

66

73

80

86

163

147

140

130

124

114

Less: Capital expenditures

(58)

(60)

(62)

(64)

(66)

(68)

Free cash flow

338

403

470

539,

618

694

PV of FCFF
PV of Terminal Value
Enterprise Value
Net Cash /(Debt)
Non-controlling Interests
Equity value
Shares Outstanding
Fair value per share
Share price as of 15/03/12

42

1,715
2,771
4,487
(337)
0
4,150
100
THB 41.50
THB 38.00

Assumptions

WACC
Terminal growth
Effective tax rate

17.00%
5.00%
30.00%

6.2 Indicative Valuation Analysis
Malee is currently fairly valued as its share price lies within our indicative valuation range

Current market price

DCF

Indicative valuation range

EV/EBITDA

Price to Sales
Valuation Analysis
Fair value of
THB 35.84 – THB 49.35 per
Malee per share share
THB 3.55 bil – THB 4.61 bil
Equity valuation
(S$148 mil – SS$203mil)
Current market THB 3.80 bil
capitalization
(S$154 mil)

EV/Sales

Price to Book

-

43

1

2

3

4

5

6

7

8

9

10

11

THB bil

6.3 Synergy Value
Assumptions

Expected Synergy Value of S$83m

• Increased soft drink revenues
attributed by higher market
penetration in Thailand
• Decreased operating expenses due
to economies of scale and crosssharing of distribution networks

SGD mil
11,600
83

11,500

11,400

Valuation Inputs
Forecast Period

5 years

WACC

8.50%

Tax Rate

24.66%

Terminal Growth Rate

2.0%

163

11,300

11,555

11,200
11,309
11,100

11,000
F&N

Malee

Synergy

Equity Value

44

Sukhumvit

6.4 Scenario Analysis
Premium to Offer

Comparing Best & Worst Case Scenarios

Initial

Walk-Away

SGD mil
160

S$163 mil
THB 3.96 bil

S$220 mil
THB 5.33 bil

140

Offer price per
share

THB 40.00

THB 53.83

100

% premium of
current price

5.26%

41.66%

Offer value

120
80

145

60
83

40

Meeting F&N’s Internal Returns
Requirements
• Based on F&N’s asset allocation policy, any
new investment should generate a return of
10% or more

20
-

22
Worst

Base

Best

45

Base Case

Best Case

Average Y-o-Y growth
in soft drink revenues

9.80%

10.00%

10.20%

Reduction in operating
exp as a % of revenue

1.75%

1.80%

1.85%

ROI for initial offer

13.50%

50.92%

88.96%

ROI for walk-away offer

• Depending on worst or best outcomes of the
acquisition, F&N may stand to gain
synergies between S$22 mil and S$145 mil

Worst Case

10.00%

37.73%

65.91%

7.1 Transaction Structure
Full takeover bid for Malee with a view of full ownership and subsequent delisting of Malee

Offer Price

Offer Period

F&N
Tender Offer Process

Malee

Tender
Acceptance

• Offer Price: THB 40.00 per share
• Premium: 5.26%

• 25 business days with option to
extend by up to 30 business
days

Time Frame

• Projected to take 20 weeks to
complete

Minimum
Acceptance Level

Malee’s
Shareholders

47

Delisting

• 75% of total shares outstanding
according to Thai legislation

• Intention to delist target from
the SET

7.2 Proposed Considerations
Deal Structure
100% Cash Offer

Negotiation Strategy
• Aim: To create a regional powerhouse in the soft
drinks industry

• F&N’s liquid balance sheet, due to availability of
large cash reserves to facilitate acquisition
• Existing undrawn credit facility of S$3.2 billion gives
F&N flexibility in terms of payment mode
• No dilution of F&N’s shares

• Win-win situation: Convince Malee that it is in their
interest to merge with a bigger player
• Cooperative approach in order to create value and
retain management expertise in running the fruit
juice business
• Provide shareholders with an opportunity to cash
out at an attractive valuation

S$ mil
1500

Decision to Delist

1000

• Retain sole control of Malee without shareholder
dilution

500

• Reduce exposure to fluctuation in Thai equity
markets

0
Malee's Market Cap

48

F&N Cash Balance

• Cost savings from not having to adhere to Thai
listing requirements

7.3 Transaction Timeline
Event
Information
Provision &
Due
Diligence

Process
Organizational Meetings
Preliminary Due Diligence
Info Memorandum Preparation
Confidentiality Agreement

Marketing

Meeting with Malee Management
Indicative Offer
Assessment of Malee’s Feedback
Affirm Target’s Interest
In-depth Due Diligence

Negotiation
& Closing

Submission of Offer
Structuring & Negotiations

Finalization of Deal

49

Estimated 20 Weeks
April

May

June

July

August

7.4 Deal Summary
Synergies
• R&D capabilities to facilitate innovation of healthier
products

Terms of Deal
Target Company

Malee Sampran

Proposed Nature of
Deal

Full takeover bid with a
view of full ownership and
subsequent delisting

• Expanded product mix that includes canned fruits,
to cater to a wider customer base

Current Share Price

THB 38.00

Initial Offer Price

THB 40.00

• Expected values of synergies = S$83mil

Initial Offer Value

THB 3.96 bil (S$163 mil)

Initial Premium

5.26%

Walk-Away Offer

THB 53.83

Walk-Away Value

THB 5.33 bil (S$220 mil)

Walk-Away Premium

41.66%

Expected Duration

20 Weeks

• F&N can capitalize on Malee’s extensive distribution
network to penetrate the Indochinese market

Due to the potential synergies that can be derived from the acquisition of Malee, J.P. Morgan
strongly recommends the Sukhumvit Deal

50

8.1 Our M&A Deal Team
Senior Advisors

Timothy Zee
Senior Managing Director
Head of Asia Investment Banking

M&A Advisory Team

Calvin Zhang
Executive Director
Co-Head of Asia M&A

Mathew Welch
Executive Director
Co-Head of Asia M&A

Tan Cher Aik
Director
Head of Asia Corporate Finance

Joshua Xie
Director
Head of S.E. Asia M&A

Shaikh Ahmad Mattar
Director
Head of Thailand Coverage

Jan Bucher
Senior Vice President
Asia-Pacific Equities

Specialist Research Team

Hafiz Hussin
Director
Co-Head of Consumer & Retail

52

Tan Fei Fan
Director
Co-Head of Consumer & Retail

8.2 Our Accolades
Awards & Accolades
Derivatives House of the Year
Equity Derivatives House of the Year
OTC Clearing Service of the Year
Risk, January 2012
#1 All-America Research Team
#1 Latin America Research Team
Institutional Investor, October 2011
Best Global Commodities House
Euromoney, July 2011
Securitization House of the Year, U.S.
Dollar Bond House, and Asia-Pacific
Structured Equity House
IFR, January 2011
Bank of the Year, Equity-linked House,
Australia and New Zealand Bond
House
IFR Asia, December 2010
Best Investment Bank
Latin Finance, January 2010

53

League Tables
Rank

Bank

Fees (US$ mil)

1

J.P. Morgan Chase

5198.36

2

Bank of America

4629.81

3

Morgan Stanley

3950.08

4

Goldman Sachs

3778.22

5

Credit Suisse

3174.94

6

Citi

3079.60

7

Deutsche Bank

3026.56

8

Barclays Capital

2671.00

9

UBS

2254.14

10

Wells Fargo

1363.46

Total

75104.73
Source: Financial Times

With J.P. Morgan’s proven track record, we will be able
to capitalize on our intrinsic knowledge and
recommend unique business insights to our clients

9.1 Supplementary Industry Analysis
Porter’s Five Forces Analysis of Soft Drinks
Industry in Singapore and Malaysia
•

Low buyer power due to the large ratio of buyers to
industry players and their inclination towards more
prominent brands in the market

•

Moderate threats of suppliers due to their limited numbers
and exposure to volatile supplies of raw materials. Despite
this, the availability of substitutes has significantly reduced
these threats

•

The wide variety of other beverages such as coffee, tea or
other homemade juices, along with relatively low switching
costs, poses threats to the soft drink industry in terms of
substitutability

•

•

55

Threat of new entrants is moderate due to the difficulties in
competing with the incumbent players in terms of huge
investments in manufacturing capacities
A fairly concentrated market with few major players
coupled with low ease of exit due to certain specialized
equipment. This has created a moderate degree of rivalry in
the market

Degree of
rivalry

New entrants

Buyer power
5
4
3
2
1
0

Supplier
power

Substitutes
Singapore/Malaysia

9.2 Detailed Analysis of Potential Targets
Company
Malee
Sampran

Background
• Publicly listed
in the Stock
Exchange of
Thailand
• Strong in fruit
processing
business

Products & Services
• Juice Concentrates
• RTD Juice
• Canned Fruits
• Cereal Beverages
• Bottled Water

Market Share
• Thailand Fruit Juice
(6%)
• Vietnam Fruit Juice
(4%)
• Pakistan Fruit Juice
(1%)
• Hong Kong Fruit Juice
(0.3%)

Key Financials
(US$ mil)
Value: 95.3
Market Cap: 85.5
Profit Margin:
6.2%
PE: 19.4

Rating Score
Market Share: 4
Geographical
Presence: 5
Profitability: 3
Product Range: 4
Synergies: 3
Ease of Acquisition: 4
TOTAL SCORE : 23

Vietnam
Dairy
Products JSC

• Publicly listed
in Ho Chi Minh
Stock Exchange
• Strong in
healthy dairy
products

• Fresh milk, yoghurt,
ice-cream, cheese, milk
powder
• Fruit Juice, Smoothie,
Aloe Vera, Soy bean
milk

(23%)
• Vietnam Overall Soft
Drinks (2%)

Enterprise Value:
2,220
Market Cap: 2,431
Profit Margin:
19.5%
PE: 11.71

Market Share: 5
Geographical
Presence: 3
Profitability: 5
Product Range: 2
Synergies: 2
TOTAL SCORE : 20

Chia Kim Lee
Food
Industries

• Private firm
based in
Singapore
• Strong brand
presence in
Vietnam

• Fruit Juice, Bottled
Water, Non-alcoholic
Beer, Energy Drinks
• Cooking oil
• Groceries

(4%)
• Singapore Fruit Juice
(0.8%)
• Distribution network in
Indochina, Australia,
Middle East

N/A

Market Share: 3
Geographical
Presence: 4
Profitability: Product Range: 3
Synergies: 3
TOTAL SCORE: 15

56

9.2 Detailed Analysis of Potential Targets
Company
TIPCO Foods

Background
• Publicly listed
in the Stock
Exchange of
Thailand
• Very strong in
Pineapple
business

Products & Services
• Juice Concentrates
• RTD Juice
• Canned Fruits
• Aloe Vera
• Retail Juicebar Squeeze

Market Share
• Thailand Fruit Juice
(10.5%)
(0.5%)

Key Financials
(US$ mil)
Enterprise Value:
160.3
Market Cap: 76.2
Profit Margin:
3.12%
PE: 12.42

Rating Score
Market Share: 5
Geographical
Presence: 4
Profitability: 4
Product Range: 4
Synergies: 3
TOTAL SCORE : 22

Universal
Robina Corp.

• Publicly listed
in the Philippines
Stock Exchange
• Strong brand
portfolio

• Snacks
• RTD Tea, Coffee,
Energy Drinks, Bottled
Water
• Commodities – Flour
& Sugar
• Farm products
• Industrial packaging

• Philippines RTD Tea
(66%)
• Vietnam Soft Drinks
(12%)
• Distribution networks
in Singapore, Thailand,
Malaysia

Enterprise Value:
2,629
Market Cap: 2,770
Profit Margin:
6.9%
PE: 21.12

Market Share: 3
Geographical
Presence: 5
Profitability: 4
Product Range: 1
Synergies: 2
TOTAL SCORE : 17

Saigon
Beverages

• Publicly listed
in Vietnam Stock
Exchange
• Market leader
in Vietnam
carbonated
drinks market

• Soft drinks, soya milk,
fruit juices, sparkling
wine

• Vietnam soft drinks
(6%)
• Vietnam carbonates
(10%)

Enterprise Value:
5.9
Market Cap: 2.4
Profit Margin:
-11.69%
PE: 0.07

Market Share: 2
Geographical
Presence: 2
Profitability: 0
Product Range: 1
Synergies: 3
TOTAL SCORE: 12

57

9.3 Synergies with Existing Operations
Before Acquisition

After Acquisition

Fruit Tree Fresh in
Thailand

• Given the small number of products and low market
share of Fruit Tree, F&N should phase out Fruit Tree in
Thailand while growing Malee’s existing fruit juice
business

Fruit Tree Fresh
outside of Thailand

• Fruit Tree has gained brand presence in
F&N’s major markets such as Singapore &
Malaysia

• F&N to tap on Malee’s expertise and R&D capabilities to
further improve existing fruit juice products
• Malee’s strong fruit supply network, and fruit
processing capabilities can be used to reduce costs of
production for F&N’s existing fruit-based business

Malee Fruit Juices

• Major player in Thailand and Vietnam fruit
juice market

• F&N’s brand management and marketing capabilities
can be used to further improve Malee’s success in
Indochina and beyond

F&N Dairies
(Thailand)

• F&N Dairies (Thailand) markets mainly dairy
products under both its in-house brands and
external brands (Nestle)
• Growth of subsidiary is led by the success of
its canned milk business
• Subsidiary faces strong competition from
domestic players with stronger distribution
network

• F&N Dairies to focus on its core canned milk business
with the option of introducing additional brands
• F&N Dairies (Thailand) can continue to grow its
existing product portfolio by taking advantage of Malee’s
extensive distribution network in Indochina

Other F&N Products

58

• Fruit Tree Fresh has only two existing
products (both orange juice) in the Thai
market which make up a 0.1% overall share

• Difficult to penetrate overseas markets
without local expertise and presence

• F&N can capitalize on Malee’s presence in the
Indochinese markets to push its existing brands into new
markets. Brands that have seen regional success such as
100Plus can now be introduced with greater ease.

9.4 Potential Strategies for Acquisition
Hostile Takeover (100% tender)

Creeping Tender (<25% initially)

Strategy

• Tender for 100% of target’s shares
• At least 90% of target’s shares must be tendered
(to delist target), or the offer is void

• Negotiate with major shareholders to buy close
to 25% shares (threshold for mandatory tender
offer) first
• Tender for the remaining shares to get 90%+ at
a later date

Pros

• A clear-cut strategy: either F&N gains 90%+
control of target or none at all
• Cheaper alternative as there are no sunk costs
incurred prior to the tender offer

• Easier to buy the initial <25% than 100%
tender, and the success will incentivize target’s
remaining shareholders to sell their stakes
• A significant stake (20 – 24.99%) will allow F&N
to gain a board seat, hence a way to gradually
obtain information necessary for detailed
valuation

Cons

• May be difficult to buy 90%+ in one single
tender offer
• Little chance for F&N to conduct due diligence
prior to launching the offer
• May invite competing bids that drive up the
price

• Difficult for F&N to sell stake if tender offer for
the remaining shares fall through
• May be more expensive than 100% tender offer

Creeping Tender is preferable for F&N due to the non-hostile takeover stance which is necessary to maintain a
cooperative post-acquisition relationship. Accumulating shares pre-acquisition will also increase the F&N’s
chances of obtaining full control of the firm

59

9.5 Modes of Payment
Cash Offer

Stock Offer

Cash + Stock Offer

Pros

• Malee’s shareholders will most
likely accept the offer due to greater
liquidity
• Lowest premium paid for the offer
• Capital structure of F&N will be
retained without any dilution of
existing shares

• A more proportionate allocation of
risk due to the additional stake given
to Malee’s shareholders.
• Malee’s shareholders may be willing
to hold on to F&N shareholder equity
due to its strong and stable price
performance.

• Allows both parties to reap benefits
from both payment types
• Higher premium required relative to
a cash offer

Cons

• Undrawn credit facility may need to
be tapped resulting in a longer time
taken for deal execution
• Higher risk absorbed by F&N’s
shareholders as Malee’s shareholders
do not have a stake in the combined
firm.

• Least likelihood of offer acceptance
as Malee’s shareholders are unable to
cash out
• Highest premium paid for the offer
• Excessive dilution of F&N’s existing
shares therefore not favorable from
F&N’s shareholders’ perspective

• Difficult to ascertain ideal weightage
of cash to equity
• Dilution of F&N’s shares still occurs

Given F&N’s access to sufficient cash reserves & credit facility, cash offer is ideal as it avoids dilution of existing F&N shares.

60

9.6 Transaction Risks & Mitigating Factors
Concerns
Regulatory Issues

Thai government might intervene to block the
acquisition to protect domestic fruit
processing companies.

• Regulatory intervention is unlikely given the precedent
transactions involving Thai fruit juice companies (e.g.
Suntory’s 50% acquisition of Tipco)
• F&N can work closely with Thai regulators to allay such
concerns, portraying itself as a global partner which
Malee can leverage on

Stock Price
Volatility

Sharp changes in the stock price of Malee will
affect the perceived premium given to
shareholders, as well as the actual takeover
amount.

• Proposed transaction timeline of approximately 20
weeks suggests a shortened process which could
mitigate fluctuations in share price
• Make use of a collar agreement to mitigate the threat of
stock price fluctuations during the process of the
acquisition

Unable to Achieve
Full Control

F&N might not be able to reach full control to
pass special resolutions due to uncooperative
Malee shareholder base.

• Accumulating equity shares pre-acquisition
• Get in touch with key shareholders during tender offer
bid process to ascertain likely interests and reaffirm
F&N’s intention for Malee

Cultural Conflicts

61

Mitigating Factors

F&N may find difficulty in integrating the
company post-acquisition. It needs to
integrate Malee into its existing business in a
quick and timely fashion in order to reap the
full synergistic value of the deal.

• Concerns are mitigated with F&N’s diversified
geographic presence throughout Asia Pacific. F&N’s
existing Thai operations caters for seamless integration
between the two firms

9.7 Critical Success Factors
Issues
Transaction Structure

The transaction structure should not be too long
and complex for shareholders, and at the same
time, meeting F&N’s objectives to fully acquire
and delist Malee

JP Morgan proposes a triggered tender offer
approach and will render its seasoned
experience in such bids to achieve maximum
satisfaction for both companies.

Pricing

The pricing offered to all shareholders would
need to be sufficiently attractive to appropriately
reflect Sakura’s fundamental value and takeover
premium

JP Morgan has conducted preliminary valuation
analysis to provide insights into the economics of
the deal and will continue to deliver value in this
aspect to ensure optimal pricing

Access to key
institutional
shareholders

Gathering
detailed
intelligence
and
understanding the expectations of key
institutional shareholders would be critical in
achieving a successful outcome

JP Morgan has one of the strongest equities and
distribution platforms in Asia and can deliver
access to the key institutional shareholders of
Malee

Communication to Retail
Shareholders

62

Our Value Proposition

Malee has a strong retail shareholder base
comprising of over 30% of outstanding shares.
Communicating key messages to these
shareholders would be critical to securing their
support. Mandatory newspaper notices may not
be sufficient to reach out to entire retail
shareholder base.

JP Morgan has advised on takeovers with large
retail shareholder bases and has successfully
used various communication mechanisms (e.g.
shareholder hotline, media campaigns) to deliver
a successful outcome to its clients.

9.8 Statutory Requirements
Applicable
Legislation

• The Public Companies Act (“PCA”)
• Securities and Exchange Act (“SEA”)
• SEC Notification No. GorJor.53/2545 (the “Takeover Code”)
• Stock Exchange of Thailand (“SET”) listing requirements

General
Conditions

• Amalgamation proposals require approval by way of special resolution (75% majority) passed at general meetings of each of the
amalgamating companies.
• Tender offer has to remain open for at least 25 business days after posting of the offer document to target shareholders.
• Specific consent from the SEC is required to make any offer conditional. Common conditions for voluntary tender offers include a
minimum number of shares being tendered in acceptance of the tender offer. However, for mandatory tender offers every condition
must be negotiated with the SEC on a case-by-case basis.
• Takeover Code does not entitle a successful bidder to compel the minority shareholders to sell their shares to the bidder.

Means of
Obtaining
Control

• Stakebuilding is permitted, subject to restrictions on insider dealing, disclosure obligations and mandatory bid thresholds.
• Mandatory bid thresholds are 25%, 50% and 75% of voting rights.
• For a tender offer, the offer price must be at least the highest price paid by the bidder in the 90 days preceding the date of application
for tender offer

Announcement
of Tender Offer

Other Disclosure
Requirements

•Acquisitions or disposals of shares in any company listed on the SET that result in a change of shareholding which reaches or crosses
any multiple of 5% of the voting rights of the company must be disclosed within one business day to the SEC.
• If a mandatory bid obligation is triggered, a form of declaration of intention for tender offer must be filed with the SEC within one (for
mandatory offers) or three (for voluntary offers) business days.
• The terms of any irrevocable undertaking must be disclosed in the announcement of a bidder’s offer and in the tender offer document.

Delisting
Requirements

63

• Before an approach is made to a target company, responsibility for making an announcement rests with the potential bidder. The
bidder must report the total number of shares held by the bidder and file a form of declaration of intention for tender offer to the SEC by
the end of the business day following the day of any acquisition that triggers a tender offer. The bidder must submit a tender offer form
to the SEC within seven business days of reporting the trigger point.
• Announcements should be made through advertisement in at least two Thai- language daily newspapers and one English-language
newspaper for at least three consecutive days if the offer period and terms of the offer are finalised, or one day if the offer period and
terms of the offer are not finalised.

Approval for de-listing can be sought from the SET following approval in a general meeting by target shareholders holding at least 75%
of the shares issued by the target, provided target shareholders that vote against the resolution do not hold more than 10% of the shares
issued by the target.

Source: Herbert Smith LLP

10.1 Merger Comparables
Date
06/12/2011
16/09/2010
28/07/2010
17/12/2009

Target Name
Coca-Cola Central Japan
Co Ltd
Pepsi-Cola Products
Philippines Inc
China Huiyuan Juice
Group Ltd
Coca-Cola West Co Ltd

Acquirer Name

Announced
Target
Revenue
Total Value Enterprise
Multiple
(M)
Value

EBIT
EBITDA Target Target
Multiple Multiple P/B
P/S

Coca-Cola Co/The

267.4

291.6

0.4

17.0

5.3

0.5

0.2

Lotte Chilsung
Beverage Co Ltd

100.2

187.6

0.8

13.0

6.0

1.7

0.6

SAIF Partners Ltd

260.8

1174.3

2.7

-

49.9

0.7

0.9

Nomura Holdings Inc

174.5

1895.6

0.5

17.7

5.8

0.6

0.4

20.3

352.0

0.8

3.9

-

0.9

1.0

181.0

296.5

22.6

-

-

2.6

3.7

40.5

483.1

2.9

17.7

13.6

2.7

2.3

15.0

53.9

24.7

285.3

143.1

8.2

20.5

137.9

1771.4

1.0

22.8

13.4

1.8

0.9

Yantai North Andre Juice Uni-President China
Co
Holdings Ltd
Shenzhen Shenbao
Xinyi Technology
12/10/2007
Industrial Co
Group Co Ltd
Super Group
03/07/2007
Yeo Hiap Seng Ltd
Ltd/Singapore
Mount Everest Mineral Tata Global Beverages
01/06/2007
Water Ltd
Ltd
Asahi Group Holdings
06/02/2007
Kagome Co Ltd
Ltd
12/12/2008

02/12/2005

NutriAsia Pacific Ltd

206.5

499.2

1.9

13.4

11.2

1.7

0.9

01/12/2005

Del Monte Pacific Ltd

MCI Inc/Philippines

118.7

499.2

1.9

13.0

10.9

1.7

0.9

07/02/2005

AgriPure Holding PLC

Private Investor

12.0

16.8

0.5

34.9

14.2

1.5

0.5

Mean

5.1

43.9

27.3

2.1

2.7

Median

65

Del Monte Pacific Ltd

1.4

17.3

12.3

1.7

0.9

10.2 Company Comparables
Ticker

Name

Price to
Book

Price to
Earnings

Price to
Sales

EV/EBITDA
T12M

EV/Sales
T12M

EV (SGD)

Market Cap
(SGD)

MALEE TB

Malee Sampran Public
Co Ltd

1.49

11.07

0.41

20.83

0.78

116.6

103.1

TIPCO TB

Tipco Foods PCL

1.22

6.46

0.46

33.03

1.08

213.4

90.9

APURE TB

Agripure Holding PLC

1.49

44.50

0.53

16.87

0.64

24.6

20.4

0.78

6.43

0.62

8.22

0.70

82.8

73.1

1.34

9.16

0.51

7.40

0.61

96.4

105.9

1.05

18.12

0.16

17.73

0.43

172.6

104.2

0.90

15.94

0.97

12.10

0.87

93.4

105.5

SFP TB
CHOTI TB
1225 TT
MABR IT

Siam Food Products
Public Co
Kiang Huat Seagull
Trading
Formosa Oilseed
Processing
MAABAROT PRODUCTS
LTD

1236 TT

1.67

16.93

1.06

11.40

1.33

131.8

106.3

079660 KS

Sahohaepyo Corp

0.83

7.88

0.21

17.40

0.36

223.7

115.8

SNAK US

Investure Foods Inc

1.63

27.69

0.42

9.45

0.66

141.3

107.1

SFGI SP

66

Hunya Foods Co Ltd

Sino Grandness Food
IndustryINO

1.23

3.22

0.49

2.44

0.55

125.3

109.2

10.3 F&N’s Financials
Growth Forecasts
Forecasted Growth Rates by
Segment

2009A

2010A

2011A

2012F

2013F

2014F

2015F

2016F

Soft drinks

9.73%

7.04%

23.49%

13.31%

-25.00%

5.00%

8.00%

9.00%

10.00%

Dairies

33.53%

-5.98%

4.19%

4.86%

4.50%

4.90%

5.00%

5.00%

5.00%

Breweries

10.91%

3.01%

21.86%

14.96%

12.00%

10.00%

10.00%

10.00%

10.00%


-10.13%

-12.36%

-1.60%

-3.25%

-3.00%

-3.00%

-2.00%

-2.00%

-2.00%

Commercial property & REIT

18.80%

13.43%

-14.39%

-8.43%

22.50%

8.00%

12.00%

10.00%

8.00%

Development property

-15.72%

27.50%

8.34%

14.60%

-49.00%

6.00%

7.00%

8.00%

10.00%

Others

60.13%

29.42%

18.11%

8.28%

4.00%

3.00%

2.00%

2.00%

2.00%

Elimination

67

2008A

54.22%

10.56%

10.82%

11.88%

-11.00%

-11.00%

-11.00%

-11.00%

-11.00%

Balance Sheet
(S$ mil)
NON-CURRENT ASSETS

2007A

2008A

2009A

2010A

2011A

2012F

2013F

2014F

2015F

2016F

Fixed assets

1,157.64

1,231.83

1,239.72

1,104.22

1,187.05

1,233.77

1,322.67

1,427.64

1,543.08

1,672.83

Investment properties

3,224.39

3,558.92

3,444.23

2,139.03

2,476.74

2,653.61

2,844.82

3,070.59

3,318.87

3,597.94

Subsidiary companies

127.83

162.30

169.80

102.35

109.73

118.44

128.01

138.78

28.04

30.06

32.44

35.07

38.02

Joint venture companies
Associated companies

-

-

-

-

89.84

60.10

1,355.25

1,382.20

1,266.98

1,358.28

1,466.07

1,584.61

1,717.86

96.46

60.64

877.74

1,233.39

1,597.95

1,101.83

1,168.46

1,174.13

1,175.59

1,177.32

1,179.22

1,181.36

5,484.06

Others

89.49

-

6,247.08

6,541.19

5,790.16

6,274.55

6,458.89

6,841.14

7,292.51

7,788.86

8,346.77

CURRENT ASSETS
Inventories

480.06

468.50

423.51

391.92

373.41

354.80

380.36

410.55

443.75

481.06

Receivables

1,348.53

1,005.48

971.26

1,273.61

1,278.60

1,219.56

1,307.43

1,411.20

1,525.30

1,653.56


7.58

26.56

11.67

6.54

6.12

12.51

13.42

14.48

15.65

16.97


0.25

0.91

5.11

10.80

13.18

5.78

6.19

6.69

7.23

7.83

Short term investments

4,401.38

4,744.93

4,271.53

4,350.88

4,227.03

3,903.80

3,829.11

3,748.76

3,636.57

3,492.16

Bank fixed deposits
Cash and bank balances
Total Assets

845.21
305.59
7,388.59

629.88
403.06
7,279.32

1,269.50
373.81
7,326.38

1,274.63
424.29
7,732.66

1,180.94
418.67
7,497.94

1,065.72
576.60
7,091.79

1,142.51
646.65
7,280.29

1,233.18
679.35
7,462.23

1,332.89
706.53
7,611.29

1,444.97
720.29
7,751.76

1,166.75

1,245.07

1,441.98

1,488.95

1,421.91

1,398.41

1,499.17

1,618.15

1,748.98

1,896.05

2.15

4.07

3.06

6.35

14.26

5.81

6.23

6.72

7.26

7.87

16.79

17.55

1.04

0.95

3.04

8.76

9.39

10.13

10.95

11.87

2,685.75

2,326.99

1,990.87

2,224.78

1,103.49

948.37

1,016.70

1,097.39

1,186.12

1,285.85

3,871.44

3,593.67

3,436.94

3,721.03

2,542.70

2,361.34

2,531.48

2,732.39

2,953.32

3,201.65

2,495.21

3,365.30

3,617.63

2,737.58

2,212.11

CURRENT LIABILITIES
Payables
Short term liabilities
NON-CURRENT LIABILITIES
2,669.90

3,312.11

2,638.39

2,527.82

2,386.37

18.81

18.76

19.30

25.04

20.41

21.17

22.69

24.49

26.47

28.70

105.15

130.15

110.24

158.38

176.24

138.95

148.96

160.78

173.78

188.39

2,619.17

3,514.21

3,747.18

2,853.33

3,508.76

2,897.69

2,810.04

2,713.09

2,586.62

2,429.20

Share capital

1,313.92

1,330.30

1,341.71

1,374.50

1,417.40

1,417.40

1,417.40

1,417.40

1,417.40

1,417.40

Reserves

3,906.68

3,952.98

4,243.02

4,768.30

5,464.81

5,857.63

6,267.66

6,703.09

7,169.20

7,673.26

Non-controlling interests

1,161.45

1,135.24

1,098.73

805.66

838.81

1,063.60

1,140.23

1,230.73

1,330.24

1,442.09

6,382.04

6,418.52

6,683.46

6,948.46

7,721.02

8,338.63

8,825.29

9,351.22

9,916.84

10,532.75

Borrowings
Provision for employee benefits
Deferred tax liabilities
SHARE CAPITAL AND RESERVES

68

Income Statement
2007A

2008A

2009A

2010A

2011A

2012F

2013F

2014F

2015F

2016F

Revenue

4,731.17

4,990.07

5,146.33

5,696.78

6,274.29

5,530.34

5,928.83

6,399.36

6,916.79

7,498.39

Cost of sales

(3,197.97)

(3,316.32)

(3,438.01)

(3,708.92)

(4,162.15)

(3,675.46)

(3,940.29)

(4,253.00)

(4,596.89)

(4,983.42)

Gross profit

1,533.20

1,673.75

1,708.33

1,987.86

2,112.14

1,854.89

1,988.54

2,146.36

2,319.90

2,514.97

(S$ mil)

Other income (net)

52.02

24.53

17.62

Operating Expenses

(900.77)

(968.35)

(952.78)

(1,012.30)

(1,081.11)

(1,017.13)

(1,090.42)

(1,176.96)

(1,272.12)

(1,379.09)

684.45

729.93

773.17

989.33

1,070.72

868.81

931.42

1,005.34

1,086.62

1,177.99

Share of joint venture companies' profits

14.16

11.71

12.73

15.28

17.34

14.67

15.72

16.97

18.34

19.89

Share of associated companies' profits

22.02

14.91

1.00

47.60

51.94

27.06

29.01

31.32

33.85

36.69

Trading Profit

Gross income from investments

13.77

11.48

9.24

11.68

18.78

Profit before Interest and Taxation (PBIT)

732.10

765.78

798.58

1,070.99

Finance income (cost)

(71.07)

(64.59)

(61.72)

Profit before impairment, FV adj, taxation and exceptional items

661.03

701.19

736.87

Impairment on investments

-

(47.96)

FV adjustments of investment properties

-

71.85

Exceptional Items
Profit before taxation

Taxation
Profit from continuing operations after taxation

Profit from discontinued operations after taxation
Profit after taxation

69

39.69

33.29

35.94

38.84

12.92

13.86

14.96

16.16

1,151.55

923.47

990.01

1,068.58

1,154.98

(62.33)

(53.86)

(65.79)

(70.53)

(76.13)

1,008.66

1,097.69

857.68

919.48

992.45

(7.29)

(9.00)

(122.60)

129.41

11.55

31.06

140.06

42.11

17.52
1,252.10

(82.29)

(89.21)

1,072.69

1,162.89

-

-

-

-

-

-

-

-

-

-

11.66

12.06

7.12

43.04

175.13

672.69

737.14

614.10

1,172.11

1,412.88

857.68

919.48

992.45

(174.36)

(169.43)

(179.19)

(270.40)

(298.53)

(209.76)

(224.87)

(242.72)

(262.34)

(284.40)

498.33

567.71

434.91

901.71

1,114.35

647.92

694.60

749.73

810.35

878.49

498.33

567.71

7.47

159.80

442.38

1,061.52

1,114.35

-

647.92

-

694.60

-

749.73

1,072.69

810.35

1,162.89

878.49

Cash Flow Statement
(S$ mil)

2007A

2008A

2009A

2010A

2011A

2012F

2013F

2014F

2015F

2016F

661.03

725.08

614.39

1,127.41

1,237.75

857.68

919.48

992.45

1,072.69

1,162.89

145.52

149.40

161.69

147.57

132.83

150.29

159.83

171.10

183.48

197.40

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation and exceptional items
Adjustments for:
Depreciation and amortization
Other non-cash adjustments
Other adjustments
Working capital changes
Cash generated from operations

9.90

9.93

(83.04)

(127.47)

19.36

21.41

23.83

26.49

29.48

(291.67)

(388.45)

(403.85)

(361.98)

(367.97)

(374.43)

(381.42)

(388.96)

366.26

34.03

(231.92)

37.58

11.08

26.59

43.65

62.42

83.07

982.09

734.34

571.56

876.84

676.42

759.34

856.59

963.67

1,083.89

(303.81)

(268.58)

(496.54)
16.10

215.90

Interest expenses and other payments

(1,033.92)

(685.45)

443.50

(156.63)

273.16

41.43

(138.93)

(292.85)

(423.92)

(536.92)

Net cash from operating activities

(1,017.82)

296.64

1,177.84

414.93

1,150.00

717.85

620.41

563.74

539.75

546.96

CASH FLOW FROM INVESTING ACTIVITIES
Dividends from joint venture and associated companies

14.52

19.13

41.87

43.98

71.77

38.26

38.26

38.26

38.26

38.26

Investment income

11.48

9.24

11.68

18.78

11.55

12.55

12.55

12.55

12.55

12.55

Proceeds from sale of assets and investments

54.62

(415.06)

(191.65)

483.43

(151.46)

40.50

39.56

38.67

37.82

37.01

(318.36)

(429.41)

(225.68)

(361.19)

(338.76)

(342.59)

(342.59)

(342.59)

(342.59)

(342.59)

0.66

0.60

0.60

0.60

0.60

0.60

Increase in investments
Repayment of/(additional) trade advances
Net cash (used in)/investment activities

4.65

(0.06)

1.66

(3.89)

(233.10)

(816.15)

(362.11)

181.11

(406.24)

(250.68)

(251.62)

(252.51)

(253.36)

(254.17)

854.94

676.46

38.42

(211.62)

(709.94)

(460.78)

(460.78)

(460.78)

(460.78)

(460.78)

0.73

(0.23)

-

-

-

-

-

-

CASH FLOW FROM FINANCING ACTIVITIES
Repayment of loans
Other financing activities
Proceeds from issue of bonds
Proceeds from issue of shares

300.00

-

-

-

-

-

-

-

-

-

-

983.45

20.00

10.87

29.76

55.75

51.83

62.79

76.49

93.61

115.02

Dividends paid

(262.86)

(272.56)

(247.30)

(316.43)

(460.21)

48.27

77.75

107.47

137.42

167.60

Net cash used in financing activities

1,576.26

423.68

(198.02)

(498.29)

(814.40)

(360.69)

(320.25)

(276.83)

(229.75)

(178.16)

(95.84)

617.71

97.76

(70.64)

106.48

48.54

34.40

56.63

114.63

Net (decrease)/increase in cash and cash equivalents

70

325.33

Discounted Cash Flow Model
(S$ bil)

2011A

2012F

2013F

2014F

2015F

2016F

EBIT

1.15

0.92

0.99

1,07

1.15

1.25

Tax expense

(0.30)

(0.21)

(0.22)

(0.24)

(0.26)

(0.28)


0.14

0.15

0.16

0.17

0.18

0.20

Less: Changes in working capital

0.05

(0.05)

0.01

0.01

0.02

0.02

(0.33)

(0.31)

(0.31)

(0.31)

(0.31)

(0.31)

0.71

0.50

0.63

0.70

0.78

0.87

Free cash flow

PV of FCFF

3.18


9.76

Enterprise Value
Net Cash /(Debt)

(2,70)


10.64

Equity value

11.31

Shares Outstanding

14.12

Forecasted value per share

$8.01


71

12.94

$6.64

Assumptions
WACC
8.17%
Terminal growth
2.00%
Effective tax rate
25.92%

Sensitivity Analysis
Changes in Terminal Growth Rates

Changes in WACC

13.31

9.87

10.53,

11.31

12.22

14.39
11.68

11.31
9,75
8.29

1.00%

1.50%

2.00%

Equity Value (S$ bil)

72

2.50%

3.00%

7%

8%

8.17%

9%

10%

WACC
8.00%

8.17%

9.00%

10.00%

11.00%

$9.72

$8.01

$6.76

$6.58

$5.80

$5.04

$4.42

1.00%

$10.61

$8.62

$7.19

$6.99

$6.12

$5.29

$4.62

1.50%

$11.70

$9.33

$7.69

$7.46

$6.49

$5.56

$4.83

2.00%

$13.07

$10.19

$8.28

$8.01

$6.90

$5.87

$5.07

2.50%

$14.82

$11.24

$8.97

$8.66

$7.39

$6.23

$5.34

3.00%

$17.16

$12.56

$9.79

$9.43

$7.95

$6.63

$5.64

3.50%

73

7.00%

0.50%

Terminal Growth Rates

6.00%

$20.43

$14.25

$10.81

$10.37

$8.61

$7.10

$5.98

10.4 Malee’s Financials
Growth Forecasts
Forecasted Growth Rates
by Segment

2009A

2010A

2011A

2012F

2013F

2014F

2015F

2016F

Export sales

-48.46%

1.08%

-16.22%

24.47%

9.00%

7.50%

5.50%

4.50%

4.00%

Local sales

12.81%

-20.81%

-5.94%

30.67%

10.50%

7.50%

5.50%

4.50%

4.00%

Other income

74

2008A

-29.97%

41.77%

-5.62%

9.96%

10.50%

7.50%

5.50%

4.50%

4.00%

Income Statement
(THB mil)
Revenues
Sales
Other Income
Total Revenues

2007A

2008A

2009A

2010A

2011A

2012F

2013F

2014F

2015F

2016F

4,004.25 3,703.65 3,082.85 2,828.67 3,660.38 4,033.90 4,336.44 4,574.94 4,780.81 4,972.05
63.90

44.75

63.45

59.88

65.85

72.76

78.22

82.52

86.24

89.68

4,068.15 3,748.40 3,146.30 2,888.55 3,726.22 4,106.66 4,414.66 4,657.46 4,867.05 5,061.73

Expenses
Cost of sales
Selling and adminstrative expenses

3,337.74 3,044.06 2,348.10 2,023.37 2,571.35 2,710.68 2,781.54 2,794.80 2,774.55 2,733.68
753.79

812.70

675.67

700.21

5.42

26.16

26.55

25.65

43.28

30.59

32.88

34.69

36.25

37.70

Loss on impairment of assets (reversal)

-

30.75

3.33

-

-

-

-

-

-

-

Other expenses

-

-

-

-

5.35

-

-

-

-

-

Director and management benefit expenses

Total expenses
Profit (loss) before finance cost (EBIT)
Finance cost

Revision of estimated interest expense
Net profit (loss) for the year

75

844.80 1,013.19 1,177.47 1,335.38 1,492.81 1,653.76

4,096.95 3,913.67 3,053.66 2,749.23 3,464.78 3,754.45 3,991.89 4,164.87 4,303.62 4,425.14
(28.79) (165.27)

92.64

139.32

261.44

352.21

422.77

492.60

563.43

636.59

63.73

129.38

35.83

32.96

33.71

37.15

39.94

42.14

44.03

45.79

-

-

(74.11)

-

-

-

-

-

-

-

(92.52) (294.65)

130.93

106.36

227.73

315.05

382.83

450.46

519.40

590.79

Balance Sheet
(THB mil)
ASSETS
Current Assets
Cash and cash equivlents
Trade accounts and notes receivable
Inventories, net
Other receivables
Others
Total current assets

2007A

2008A

2009A

2010A

2011A

2012F

2013F

2014F

2015F

2016F

13.71
478.67
691.27
22.47
48.36
1,254.48

8.81
447.48
497.52
24.31
28.83
1,006.96

11.84
400.82
401.60
43.34
28.12
885.73

14.17
431.19
472.04
15.39
32.36
965.15

25.87
611.56
500.18
40.20
14.79
1,192.60

21.60
686.54
551.25
34.41
35.88
1,329.69

30.60
738.03
592.59
36.99
38.57
1,436.80

45.77
778.63
625.19
39.03
40.70
1,529.31

60.59
813.66
653.32
40.78
42.53
1,610.88

71.68
846.21
679.45
42.42
44.23
1,683.99

Non-current assets
Restricted bank deposits
Land not used in operation, net
Property, plant and equipment, net
Others
Total non-current assets
Total Assets

78.04
115.76
876.34
18.76
1,088.90
2,343.37

88.19
115.76
748.51
14.14
966.59
1,973.55

33.94
127.39
1,084.89
19.56
1,265.78
2,151.50

5.06
128.83
1,042.40
20.29
1,196.58
2,161.73

5.14
28.45
1,004.46
33.40
1,071.46
2,264.06

3.39
124.90
1,107.01
23.51
1,258.81
2,588.50

2.27
134.26
1,190.04
25.28
1,351.85
2,788.65

1.52
141.65
1,255.49
26.67
1,425.33
2,954.63

1.02
148.02
1,311.99
27.87
1,488.89
3,099.78

0.68
153.94
1,364.47
28.98
1,548.07
3,232.06

Liabilities
Current Liabilities
Bank overdrafts and short-term loans from financial institutions
Trade accounts payable and notes payable
Trade account payable and accrued interest
Factoring payable
Current portion of loans and agreements
Accrued expenses and accrued interest and other accounts payable
Others
Total current liabilities

490.96
1,005.50
242.55
149.76
121.81
192.96
27.79
2,231.33

479.83
972.62
276.93
145.78
72.43
191.19
24.46
2,163.24

355.23
924.01
100.49
76.06
167.36
9.88
1,633.04

314.88
949.64
153.52
23.14
162.01
16.97
1,620.15

250.71
977.66
47.62
6.15
233.93
46.64
1,562.71

225.64
1,162.34
47.62
67.73
257.81
28.53
1,789.67

203.08
1,249.19
47.62
72.81
277.14
30.64
1,880.49

182.77
1,317.66
47.62
76.82
292.39
32.31
1,949.56

164.49
1,376.76
47.62
80.27
305.54
33.75
2,008.44

148.04
1,431.66
47.62
83.48
317.77
35.08
2,063.66

Non-current Liabilities
Loans and agreements, net of current portion
Other payable, net of current portion
Employee benefit obligation
Total non-current liabilities
Total Liabilities

60.27
60.27
2,291.60

53.19
53.19
2,216.43

24.57
167.26
191.83
1,824.87

10.08
139.82
149.90
1,770.06

7.52
112.19
34.98
154.68
1,717.39

13.76
123.64
137.40
1,927.08

11.89
132.91
144.80
2,025.29

10.95
140.22
151.17
2,100.73

10.47
146.53
157.01
2,165.44

10.24
152.39
162.63
2,226.29

999.99
700.00
347.50
171.01
(1,166.74)
51.77
2,343.37

999.99
700.00
347.50
171.01
(1,461.39)
(242.88)
1,973.55

999.99
700.00
347.50
609.59
(1,330.46)
326.63
2,151.50

999.99
700.00
347.50
566.77
(1,222.59)
391.68
2,161.73

999.99
700.00
347.50
518.02
(1,018.85)
546.67
2,264.06

999.99
700.00
347.50
518.02
(904.09)
661.42
2,588.50

999.99
700.00
347.50
518.02
(802.15)
763.36
2,788.65

999.99
700.00
347.50
518.02
(711.61)
853.91
2,954.63

999.99
700.00
347.50
518.02
(631.18)
934.33
3,099.78

999.99
700.00
347.50
518.02
(559.74)
1,005.77
3,232.06

Shareholders' equity
Share capital
Registered
Issued and fully paid
Paid-in capital
Share premium
Revaluation surplus
Retained earnings:
Total shareholder's equity
Total liabilities and shareholders' equity

76

Cash Flow Statement
(THB mil)

2007A

2008A

2009A

2010A

2011A

2012F

2013F

2014F

2015F

2016F

(92.52)

(294.65)

130.93

106.36

227.73

315.05

382.83

450.46

519.40

590.79

139.51

124.43

94.59

45.78

50.05

55.90

59.93

63.11

65.85

68.40

22.11

58.78

29.54

33.95

18.65

28.09

28.90

29.54

30.09

30.60

Cash flows from (used in) operating activities
Net profit (loss)
Adjustments:
Depreciation and amortisation
Non cash adjustments
(Gain) loss on sales of property, plant and equipment
Others
Income from operating activities before changes in operating assets and liabilities

(0.62)
125.74

0.23

(8.47)

129.64

(38.19)

(0.09)
33.61

(13.24)
42.12

(4.44)

(4.44)

(4.44)

(4.44)

(4.44)

31.45

29.03

26.79

24.74

22.85

194.21

18.43

208.40

219.61

325.31

426.05

496.25

565.46

635.65

708.21

(124.99)

216.76

88.55

(123.29)

(204.18)

(136.06)

(120.93)

(103.03)

(94.14)

(90.41)

Operating liabilities increase (decrease)

121.09

(79.16)

(100.85)

14.79

174.09

206.19

76.61

58.18

48.79

44.58

Cash flow from operating activities

190.31

156.03

196.11

111.10

295.22

496.19

451.93

520.61

590.30

662.38

Interest expense paid

(5.27)

(6.40)

-

-

-

-

-

-

-

-

Income tax paid

(0.22)

(0.23)

(0.85)

(2.26)

(2.74)

(4.21)

(5.05)

(5.89)

(6.73)

(7.61)

184.82

149.41

195.26

108.85

292.48

491.98

446.88

514.73

583.57

654.77

(19.89)

(10.15)

54.25

28.88

(0.08)

(1.75)

(1.12)

(0.75)

(0.50)

(0.34)

-

-

-

-

-

-

Operating assets (increase) decrease

Net cash flows from operating activities
Cash flows from (used in) investing activities
Decrease (increase) in restricted bank deposits
Proceeds from disolution of investment in associated company
Acquisition of machinery and equipment
Proceeds from sales of property, plant and equipment
Interest income received
Net cash flows from (used in) investing activities

-

-

-

-

(63.87)

(40.02)

(10.10)

(47.24)

(60.93)

(62.76)

(64.64)

(66.58)

(68.58)

(70.64)

10.79

16.17

15.97

0.42

2.84

2.84

2.84

2.84

2.84

2.84

2.07

0.12

0.58

0.28

0.06

0.62

0.62

0.62

0.62

0.62

(70.89)

(33.88)

60.70

(17.66)

(58.11)

(61.05)

(62.30)

(63.87)

(65.62)

(67.51)

(40.36)

(11.13)

(124.60)

(40.35)

(64.16)

(25.07)

(22.56)

(20.31)

(18.28)

(16.45)

(3.98)

(45.29)

53.02

(105.89)

(56.46)

(45.23)

(75.62)

(22.99)

Cash flows from (used in) financing activities
Decrease in bank overdraft and short term loans from financial institutions
Increase (decrease) in factoring payable
Cash paid to agreements and other long term loans
Cash paid to interest expense
Net cash flows used in financing activities
Net increase (decrease) in cash and cash equivalents

77

14.59
(23.77)

(55.22)

(58.11)

(54.96)

(57.20)

(53.34)

(58.64)

(47.92)

(37.24)

(25.62)

(29.62)

(39.81)

(36.04)

(33.67)

(32.95)

(34.42)

(108.17)

(119.50)

(252.35)

(88.58)

(222.67)

(120.10)

(116.72)

(108.93)

(108.43)

(104.20)

3.61

2.61

11.70

310.83

267.86

341.93

409.52

483.06

5.75

(3.98)


Changes in WACC

4.78

3.71

3.00%

3.91

4.00%

4.59

4.43

4.15

4.15
3.78

5.00%

6.00%

Equity Value (THB bil)

78

5.11

7.00%

15.00%

16.00%

17.00%

18.00%

Equity Value (THB bil)

3.46

19.00%

WACC
16.00%

17.00%

18.00%

19.00%

20.00%

$46.08

$41.94

$38.39

$35.32

$32.64

$30.28

$28.18

2.00%

$49.19

$44.48

$40.50

$37.09

$34.13

$31.55

$29.27

3.00%

$52.93

$47.49

$42.96

$39.13

$35.84

$32.99

$30.50

4.00%

$57.50

$51.10

$45.87

$41.50

$37.81

$34.64

$31.90

5.00%

$63.21

$55.51

$49.35

$44.31

$40.10

$36.54

$33.49

6.00%

$70.55

$61.03

$53.62

$47.68

$42.82

$38.76

$35.33

7.00%

79

15.00%

1.00%


14.00%

$80.34

$68.12

$58.94

$51.80

$46.07

$41.39

$37.48

10.5 Sukhumvit’s Financials
Growth Forecasts
Forecasted Growth Rates by
Segment

2008A

2009A

2010A

2011A

2012F

2013F

2014F

2015F

2016F

Soft drinks

9.73%

7.04%

23.49%

13.31%

-25.00%

7.00%

10.00%

11.00%

12.00%

Dairies

33.53%

-5.98%

4.19%

4.86%

4.50%

4.90%

5.00%

5.00%

5.00%

Breweries

10.91%

3.01%

21.86%

14.96%

12.00%

10.00%

10.00%

10.00%

10.00%


-10.13%

-12.36%

-1.60%

-3.25%

-3.00%

-3.00%

-2.00%

-2.00%

-2.00%

Commercial property & REIT

18.80%

13.43%

-14.39%

-8.43%

22.50%

8.00%

12.00%

10.00%

8.00%

Development property

-15.72%

27.50%

8.34%

14.60%

-49.00%

6.00%

7.00%

8.00%

10.00%

-

-

-

-

10.50%

7.50%

5.50%

4.50%

4.00%

Others

60.13%

29.42%

18.11%

8.28%

4.00%

3.00%

2.00%

2.00%

2.00%

Elimination

54.22%

10.56%

10.82%

11.88%

-11.00%

-11.00%

-11.00%

-11.00%

-11.00%

Canned Fruit

80

Income Statement
(S$ mil)
Revenue

2007A

2008A

2009A

2010A

2011A

2012F

4,731.17

4,990.07

5,146.33

5,696.78

6,274.29

Cost of sales

(3,197.97)

(3,316.32)

(3,438.01)

(3,708.92)

(4,162.15)

Gross profit

1,533.20

1,673.75

1,708.33

1,987.86

2,112.14

Other income (net)

52.02

24.53

17.62

13.77

Operating Expenses

(900.77)

(968.35)

(952.78)

(1,012.30)

(1,081.11)

684.45

729.93

773.17

989.33

1,070.72

Share of joint venture companies' profits

14.16

11.71

12.73

15.28

Share of associated companies' profits

22.02

14.91

1.00

47.60

Gross income from investments

11.48

9.24

11.68

18.78

732.10

765.78

798.58

26.92

31.55

21.98

Trading Profit

Profit before Interest and Taxation (PBIT)
Finance income
Finance cost

(97.99)

(96.14)

(83.70)

Profit before impairment, FV adj, taxation and exceptional items

661.03

701.19

736.87

Impairment on investments
FV adjustments of investment properties
Exceptional Items
Profit before taxation

Taxation
Profit from continuing operations after taxation
Profit from discontinued operations after taxation
Profit after taxation

81

661.03

(47.96)

(7.29)

71.85

(122.60)

725.08

606.98

11.66

12.06

7.12

672.69

737.14

614.10

(174.36)
498.33
498.33

(169.43) (179.19)
567.71
567.71

1,070.99
28.17
(90.50)
1,008.66

39.69

129.41

43.04
1,172.11

5,699.55

2014F

2015F

6,248.66

6,894.10

2016F

7,613.78

8,431.46

(3,893.86) (4,264.54) (4,696.41) (5,175.26) (5,717.86)
1,805.69

2,197.68

2,438.52

36.93

34.64

1,984.12

41.33

2,713.61

45.22

50.06

(1,113.27) (1,191.21) (1,273.49) (1,382.28) (1,552.46)
727.06

829.85

965.53

1,101.47

17.34

15.12

16.57

18.28

20.19

22.36

51.94

27.89

30.58

33.74

37.26

41.26

11.55

13.32

14.60

16.11

17.79

783.38

891.61

1,033.66

1,176.71

27.41

30.05

33.16

36.62

(96.61)

(105.92)

(116.82)

815.74

949.99

1,151.55
17.70
(71.56)
1,097.69

(9.00)

1,129.07

2013F

714.19

-

-

140.06
1,237.75
175.13
1,412.88

(270.40)

(298.53)

434.91

901.71

1,114.35

7.47

159.80

442.38

1,061.52

1,114.35

-

714.19
714.19

815.74

(174.67) (199.50)
539.52
539.52

616.23
616.23

949.99

(232.34)
717.66
717.66

40.55

(128.93)

(142.67)
1,192.41

-

949.99

19.70
1,294.54

1,084.40

-

815.74

1,211.21

-

1,084.40
1,084.40

(265.21)
819.19
819.19

1,192.41
1,192.41

(291.62)
900.79
900.79

Balance Sheet
(S$ mil)
NON-CURRENT ASSETS
Fixed assets
Investment properties
Subsidiary companies
Others

CURRENT ASSETS
Assets held for sale
Inventories
Receivables
Short term investments
Bank fixed deposits
Cash and bank balances

CURRENT LIABILITIES
Payables
Short term liablities

NON-CURRENT LIABILITIES
Borrowings
Provision for employee benefits
Deferred tax liabilities

SHARE CAPITAL AND RESERVES
Share capital
Reserves
Non-controlling interests

82

2007A

2008A

2009A

2010A

2011A

2012F

2013F

2014F

2015F

2016F

1,157.64
3,224.39
127.83
96.46
877.74
5,484.06

1,231.83
3,558.92
162.30
60.64
1,233.39
6,247.08

1,239.72
3,444.23
169.80
89.49
1,597.95
6,541.19

1,104.22
2,139.03
89.84
1,355.25
1,101.83
5,790.16

1,187.05
2,476.74
60.10
1,382.20
1,168.46
6,274.55

1,317.13
2,734.80
105.49
28.90
1,305.75
1,181.00
6,673.07

1,443.06
2,998.28
115.65
31.68
1,431.55
1,183.43
7,203.65

1,589.74
3,307.98
127.59
34.95
1,579.41
1,186.14
7,825.82

1,752.63
3,653.30
140.91
38.60
1,744.29
1,189.07
8,518.80

1,937.21
4,045.65
156.05
42.75
1,931.62
1,192.35
9,305.62

4,079.33
480.06
1,348.53
7.58
0.25
322.05
845.21
305.59
7,388.59

4,603.82
468.50
1,005.48
26.56
0.91
141.11
629.88
403.06
7,279.32

4,016.84
423.51
971.26
11.67
5.11
254.70
1,269.50
373.81
7,326.38

4,347.45
391.92
1,273.61
6.54
10.80
3.43
1,274.63
424.29
7,732.66

4,223.42
373.41
1,278.60
6.12
13.18
3.60
1,180.94
418.67
7,497.94

4,019.62
388.37
1,288.06
12.90
5.95
3.52
1,098.32
332.70
7,309.43

4,031.96
425.30
1,411.49
14.14
6.53
3.52
1,204.14
157.49
7,673.04

4,034.79
468.05
1,555.66
15.60
7.20
3.52
1,328.52
-40.87
8,115.99

3,999.15
515.38
1,715.96
17.23
7.95
3.52
1,467.20
-237.71
8,591.80

3,922.76
568.91
1,897.75
19.08
8.81
3.52
1,624.77
-472.15
9,092.40

1,166.75
2.15
16.79
2,685.75
3,871.44

1,245.07
4.07
17.55
2,326.99
3,593.67

1,441.98
3.06
1.04
1,990.87
3,436.94

1,488.95
6.35
0.95
2,224.78
3,721.03

1,421.91
14.26
3.04
1,103.49
2,542.70

1,505.63
5.98
9.03
986.68
2,507.32

1,649.15
6.56
9.90
1,079.91
2,745.53

1,816.04
7.24
10.92
1,189.76
3,023.96

2,001.20
8.00
12.06
1,312.42
3,333.67

2,210.91
8.85
13.35
1,451.96
3,685.08

2,495.21
18.81
105.15
2,619.17

3,365.30
18.76
130.15
3,514.21

3,617.63
19.30
110.24
3,747.18

2,669.90
25.04
158.38
2,853.33

3,312.11
20.41
176.24
3,508.76

2,827.00
21.81
143.20
2,992.01

2,786.69
23.91
156.99
2,967.60

2,729.47
26.38
173.21
2,929.07

2,633.30
29.14
191.29
2,853.73

2,494.07
32.27
211.83
2,738.18

1,313.92
3,906.68
1,161.45
6,382.04

1,330.30
3,952.98
1,135.24
6,418.52

1,341.71
4,243.02
1,098.73
6,683.46

1,374.50
4,768.30
805.66
6,948.46

1,417.40
5,464.81
838.81
7,721.02

1,501.77
5,733.33
1,096.14
8,331.23

1,501.77
6,069.18
1,201.74
8,772.69

1,501.77
6,476.28
1,325.87
9,303.92

1,501.77
6,954.54
1,464.28
9,920.59

1,501.77
7,483.85
1,621.54
10,607.15

Cash Flow Statement
(S$ mil)

2007A

2008A

2009A

2010A

2011A

2012F

2013F

2014F

2015F

2016F

CASH FLOWS FROM OPERATING ACTIVITIES

661.03

725.08

614.39

1,127.41

1,237.75

714.19

815.74

949.99

1,084.40

1,192.41

216.95

149.40

161.69

147.57

132.83

156.67

169.98

185.56

202.90

222.58

Adjustments for:
Depreciation and amortization
Other non-cash adjustments
Other adjustments
Working capital changes
Cash generated from operations

9.68

10.24

217.87

(79.20)

(110.83)

24.74

27.56

30.88

34.58

38.79

(375.02)

(268.89)

(293.64)

(392.29)

(420.50)

(381.61)

(387.66)

(394.19)

(401.24)

(408.83)

(496.54)

366.26

34.03

(231.92)

37.58

13.97

24.76

41.80

60.55

81.18

16.10

982.09

734.34

571.56

876.84

525.06

652.20

815.89

983.06

1,128.01

443.50

(156.63)

273.16

83.37

(108.69)

(280.63)

(427.63)

(545.90)

1,150.00

608.43

543.51

535.26

555.43

582.11

Interest expense and other payments

(1,033.92)

(685.45)

Net cash from operating activities

(1,017.82)

296.64

1,177.84

414.93

CASH FLOW FROM INVESTING ACTIVITIES

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Dividends from joint venture and associated companies

14.52

19.13

41.87

43.98

71.77

38.26

38.26

38.26

38.26

38.26

Investment income

11.48

9.24

11.68

18.78

11.55

12.57

12.57

12.57

12.57

12.57

Proceeds from sale of assets and investments
Increase in investments
Repayment of/(additional) trade advances
Net cash (used in)/investment activities

319.59

38.35

176.45

670.04

197.31

364.90

368.68

373.22

378.68

385.22

(583.33)

(882.81)

(593.78)

(547.80)

(687.54)

(661.64)

(661.71)

(661.79)

(661.88)

(661.96)

0.66

0.53

0.56

0.57

(406.24)

(245.38)

(241.65)

(237.17)

4.65
(233.10)
-

CASH FLOW FROM FINANCING ACTIVITIES
Repayment of loans
Other financing activities
Proceeds from issue of bonds
Proceeds from issue of shares:
Dividends paid
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents

83

854.94

(0.06)
(816.15)
676.46

1.66
(362.11)
38.42

(3.89)
181.11
(211.62)

0.73

(0.23)

-

-

-

-

-

-

(709.94)
300.00

-

-

(461.62)

0.58
(231.79)
(461.54)

0.59
(225.32)
-

(461.82)

(461.71)

(461.46)

(3.92)

(3.88)

(3.65)

(3.71)

(3.62)

-

-

-

-

-

983.45

20.00

10.87

29.76

55.75

51.83

62.79

76.49

93.61

115.02

(262.86)

(272.56)

(247.30)

(316.43)

(460.21)

48.27

77.75

107.47

137.42

167.60

423.68

(198.02)

(498.29)

(814.40)

(365.64)

(325.05)

(281.32)

(234.22)

(182.45)

617.71

97.76

(70.64)

(2.59)

(23.19)

16.77

89.42

174.33

1,576.26
325.33

(95.84)

Discounted Cash Flow Model
(S$bil)
EBIT

2011A

2012F

2013F

2014F

2015F

2016F

1.15

0.78

0.89

1.03

1.17

1.30

Tax expense

(0.30)

(0.17)

(0.20)

(0.23)

(0.26)

(0.29)


0.14

0.16

0.17

0.19

0.21

0.23

Less: Changes in working capital

0.05

(0.06)

0.02

0.02

0.02

0.03


(0.33)

(0.31)

(0.30)

(0.30)

(0.29)

(0.29)

Free cash flow

0.71

0.40

0.58

0.71

0.84

0.97

PV of FCFF

3.11


10.12

Enterprise Value

13.23

Net Cash /(Debt)

(2.70)


1.10

Equity value
Shares Outstanding
Forecasted value per share

84

11.63
1.41
$8.24
$6.64

Assumptions
WACC
Terminal growth
Effective tax rate

8.50%
2.00%
25.92%

10.6 Sukhumvit’s Sensitivity Analysis

10.20

10.86

11.63

12.53

Changes in WACC

13.59
17.77

14.14
11.63
9.79

1.00%

1.50%

2.00%

2.50%


85

3.00%

6.50%

7.50%

8.50%

9.50%


8.38

10.50%

10.6 Sukhumvit’s Sensitivity Analysis
WACC
7.50%

8.50%

9.50%

10.50%

11.50%

$11.87

$9.62

$8.02

$6.81

$5.87

$5.13

$4.51

1.00%

$13.10

$10.43

$8.58

$7.22

$6.19

$5.37

$4.70

1.50%

$14.64

$11.40

$9.24

$7.70

$6.54

$5.64

$4.92

2.00%

$16.62

$12.59

$10.02

$8.24

$6.94

$5.94

$5.15

2.50%

$19.26

$14.07

$10.96

$8.88

$7.39

$6.28

$5.41

3.00%

$22.96

$15.98

$12.10

$9.63

$7.92

$6.66

$5.70

3.50%

86

6.50%

0.50%


5.50%

$28.50

$18.52

$13.53

$10.53

$8.53

$7.10

$6.03

FNCE 221 - Project Sukhumvit Final Edition

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